RF's Financial News

Sunday, July 31, 2016

“I love the smell of napalm in
the morning”… Robert Duvall –
Apocalypse Now

Thoughts:

You can almost hear the
helicopters flying overhead – getting ready to drop ‘free money’ on everybody
that’s willing to reach up and grab it.Remember ‘Cash for Clunkers’ – we’re almost there.How do I know?

-1. Whenever
investors feel like they MUST join the herd – because it's the only way to make
money, those same investors usually end up being slaughtered. And, please don’t tell me that ‘it will be
different this time’. Yes Verizon’s 4%
yield and Proctor & Gamble’s 3% yield look enticing, but it was just a
couple of years ago that these same stocks dropped 50% and 40% respectively – immediately
eliminating 10 years of income.

-2. It’s a
presidential election year, and there’s nothing worse than a lackluster (to
down) economy in a big election year. It
begs the question: “Are you better off now – than 4 years ago?” And coincidentally on Friday we learned that
the U.S. economy grew at a measly 1.2% annual rate –
well below the 2.6% growth estimates that economists had predicted.

Do you sense my frustration?
Month after month, I whine about how the stock market is NOT reflective of the
underlying economy.

-How is the stock
market at ALL-TIME-HIGHS when our GDP is bordering on recession?

-Over 10 million eligible
workers have stopped looking for work (an all-time-high), yet if we are to
believe our FED – there is only 5% unemployment and the labor market is extremely
tight?

-David Rosenberg
(chief economist at Gluskin Sheff) tells us that 44% of all corporate debt is
rated BBB (basically junk). U.S.
companies are currently holding the lowest level of cash to debt in a decade,
and their borrowing is NOT slowing down.

Fraud, manipulation, and other
agendas do not impress me. When Wall
Street commits fraud – it often costs us money.When politicians commit fraud, it normally costs us lives.Political fraud is fairly inexpensive given just
6 media outlets produce 85% of all U.S. news. And since the U.S. repealed its own propaganda
ban on July 2, 2013, political fraud is now legal: http://foreignpolicy.com/2013/07/14/u-s-repeals-propaganda-ban-spreads-government-made-news-to-americans/Currently our
propaganda machine is targeting Putin and Russia. He’s being blamed for everything from the Ukraine
to the DNC email hack.Hillary has
termed him: “The next Hitler”.Putin (however)
is asking the world’s journalists to start reporting reality.

-The U.S. (via
NATO) plans on having Anti-Ballistic Missiles (ABMs) on the Poland/Russia
border by mid 2018. Putin cannot let
that happen any more than we could let Khrushchev put missiles in Cuba in 1962.

If we (NATO) put those
missile batteries in Poland and the Baltic states, Russia has stated publically
that they will blow them up. Putin has stated
publically to the Polish and Baltic people: "Don't get caught up in the
crossfire between the U.S. and us. Please
do not allow those missiles, because we will have no choice but to take them
out".

So, I hear the helicopters
of war bringing in enough money to last the global economies 18 to 24
months.Then, we will attempt to beat
the Russians into submission.Unfortunately that tactic did not end well for either Napoleon or
Hitler.

The Market:

Factually:

-Sales growth has
been declining since 2012, and negative since 2015.

-In Q2 of 2016, home
ownership hit an all-time low of 62.9%.

-Former Goldman
Sachs manager and founder of Global Macro Investor Raoul Pal said that European
banks are the Eurozone’s next powder keg.

oIssue #1: Monte dei Paschi Bank (the oldest bank in
the world and third largest in Italy) is in crisis mode as it’s stock price was
over $100 pre-2008 financial crisis, and is now about $0.50.

oIssue #2: Deutsche Bank (that has had its own
struggles with profitability in this low interest rate environment) was trading
above $130 per share pre-2008, and is now below $13 (an all-time low).

oIssue #3: The Stoxx 600 European Banking Index is
bracing for the worst, and is down 22% year-to-date.The European debt crisis (which began over
five years ago) has created long-term systemic risks for banks, and is showing
no sign of letting up.

-June’s Durable Goods
Orders came in at a NEGATIVE -4%. They
also revised last month's reading lower.

Expectedly, our FED did
nothing at last week.Unexpectedly, the
Bank of Japan (BOJ) also did nothing – as the world was awaiting additional QE.
The initial market reaction was a huge
plunge, but like so many days we ended down just a smidge.This market is bullet proof. No matter how bad the numbers, it just keeps
going sideways and up depending upon how much money our FED prints and gives to
the Swiss National Bank to invest in our markets.

On Friday the U.S. GDP numbers
were supposed to show 2.6% growth. Instead, they showed a measly 1.2% growth.And to make matters worse, the first quarter
estimates were revised downward to 0.8%. Uncle Sam has twisted all the data (to look
better), has changed the way GDP is calculated (to look better), and the BEST
they could do was 1.2% growth.That
means the real GDP is probably NEGATIVE by about 3.5%.But even with all that bad news, the S&P
moved higher on the day. Seems logical, aye?
Weakening economy, recessionary GDP, and
our stock market is hitting all time highs.

Given the market held up in
spite of the lousy GDP numbers and the lack of more QE from the BOJ, I would suspect
that our markets would be moving higher this coming week.No – we don't belong higher, and there’s no
fundamental reason for us to move higher. But, that hasn’t stopped us for a long time
(years).

There is a bit of a divergence
going on. The DOW faded a bit during this
past week, while the S&P held up. The
RUSSELL (small caps) faded a bit, while the mid-caps held up. Those are normal signs of sector rotation as
money moves from asset class to asset class.For this week, continue to watch the metals.As more and more people realize how ugly the
global economies are, the more they are willing to move more into the precious metals.
The SPDR Gold Trust (the ETF that
provides exposure to Gold) took in $3.3B in new money last month, and a total
of $12.2B in the first half of 2016.This was more than all of the U.S. stock ETF’s combined during the same
periods.Please take care.

TIPS:

“Please don’t tell me that it will be different this
time…”

7 months ago I posted my
detailed trading strategy on AG – a silver mining stock.To date, every $20k that you invested in AG
is now worth $250k.2 months ago I
suggested buying some January 2018 - $4 Calls in NGD (a gold mining
stock).NGD bounced between $4 and $5,
and I decided to add more on a dip under $4 or a break above $5.To date, every $20k that you invested in NGD
is now worth $30k – and on Friday it broke out over $5 per share.I did not buy any more on Friday, but if it
holds over $5 on Monday and Tuesday, I'll be a buyer.

To follow me on Twitter.com and on StockTwits.com to get my daily thoughts
and trades – my handle is: taylorpamm.

Please be safe out there!

Disclaimer:

Expressed thoughts proffered within
the BARRONS REPORT, a Private and free weekly economic newsletter, are those of
noted entrepreneur, professor and author, R.F. Culbertson, contributing sources
and those he interviews. You
can learn more and get your free subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

Please write to Mr. Culbertson at:
<rfc@culbertsons.com> to inform him of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If you'd like to view RF's actual
stock trades - and see more of his thoughts - please feel free to sign up as a
Twitter follower - "taylorpamm"
is the handle.

If you'd like to see RF in action -
teaching people about investing - please feel free to view the TED talk that he
gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

Views expressed are provided for
information purposes only and should not be construed in any way as an offer,
an endorsement, or inducement to invest and is not in any way a testimony of,
or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are
not registered and licensed brokers. This
message may contain information that is confidential or privileged and is
intended only for the individual or entity named above and does not constitute
an offer for or advice about any alternative investment product. Such advice
can only be made when accompanied by a prospectus or similar offering
document. Past performance
is not indicative of future performance. Please make sure to review important
disclosures at the end of each article.

Note: Joining BARRONS REPORT is not
an offering for any investment. It represents only the opinions of RF
Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF
FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN
INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING
HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT
SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF
INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS
MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING
INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance
can be volatile. An investor could lose all or a substantial amount of his or
her investment. Often, alternative investment fund and account managers have
total trading authority over their funds or accounts; the use of a single
advisor applying generally similar trading programs could mean lack of
diversification and, consequently, higher risk. There is often no secondary
market for an investor's interest in alternative investments, and none is
expected to develop.

All material presented herein is
believed to be reliable but we cannot attest to its accuracy. Opinions
expressed in these reports may change without prior notice. Culbertson and/or
the staff may or may not have investments in any funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

Sunday, July 24, 2016

It’s hard to believe that
that the birth of the Internet happened 18 years ago, and Cisco is still
trading 60% below its 1998 $82 price tag.Just like the late '90's, those of us who are sticklers for
fundamentals, are not having a ton of fun in today's markets. It's really hard to get excited about buying a
10-year Treasury knowing that over the next decade you will earn a whopping
1.57% per year. Or investing in a company
like General Mills that is trading at 26X earnings, with a negative 3-year
revenue growth, a negative 3-year earnings growth, and a whopping 2.5% dividend
yield.

The simple fact is that no
one knows what Negative Interest Rates are doing to our global economy. Even one of the smartest men in the room,
Charlie Munger of Berkshire Hathaway is confused. At a recent meeting, Charlie responded to
a question about negative rates by saying: “Of course I'm confused.
Anybody who is intelligent who is not confused doesn't understand the situation
very well. There are a lot of folks
running around giving very precise advice and suggestions about how all this
plays out in the months and years ahead, and I would suggest that you pay
attention to these highly confident prognosticators at your own peril."The funny and sad thing about negative rates
is that the Central Bankers who created them are equally clueless as to exactly
what type of outcome we are to expect.

And that is why 2016 is so
different than 1998. Unlike 1998, today
there are very few places of market undervaluation. After seven years of massive Central Bank
bastardization of the free markets, it is exceedingly difficult to determine
what is right.Our extended FED has
invested in over 2,500 individual stocks and mutual funds, with the big unknown
being how long they will be allowed to play in that sand box? Will we have to see pension plans go under? Will there be a popular uprising once people realize
that the promises made to them will NEVER be honored?There's an old poker saying, “After 30
minutes if you don't know who the patsy is – then it’s YOU”. In this market it’s hard for me to identify
the patsy, and that means that it could be me.

So what if I’m the patsy,
and I’m wrong?A couple weeks ago FBI
Director Comey told us that: (a) Hillary lied under oath, (b) Hillary did have
classified documents on her private, unsecure server, and (c) Hillary’s server
was probably hacked.I remember blasting
Dir. Comey for NOT pushing for prosecution because it was his view that no
prosecutor would have taken the case.

But something didn’t sit
well with me.What if I was wrong?Dir. Comey obviously knew that the American
public would boo, shout ‘double standard’, and talk about ‘selling out’.And then it dawned on me – under normal circumstances,
the FBI would have completed their investigation and presented their findings
to the Attorney General for her decision.The FBI would NOT have told the public what they found.You and I would NOT have heard about the
classified emails, the lying, and the hacking.But rather the Attorney General would have locked down ALL of the
findings as evidence.

Dir. Comey (by doing what
he did) allowed J.Q. Public to see what a #CrookedHillary – Hillary Clinton really
is.He put the facts out there for the
whole country to see.If he had continued
with business as usual, Attorney General Lynch would have sealed those records
and said nothing. By suggesting that ‘No
prosecutor would have taken the case’, he handed both Chris Christie and Rudy
Giuliani (former prosecutors) the PERFECT fodder to go ballistic and say on the
record: "If I was still a prosecutor, I sure would have TAKEN that case!"In fact Governor Christie (at the Republican convention)
held court, with the audience shouting “She’s Guilty”.And Governor Giuliani looked directly into
the camera and said: “As a former prosecutor, I couldn't have had a better case
to prosecute than #crookedHillary Clinton!”

They could only say those
things, because Dir. Comey did what he did.Dir. Comey handed Gov. Christie, Gov. Giuliani, and the American people
a chance to compare the FACTS, to Hillary's statements, and see if they still
wanted to vote for her. Comey handed the
Republicans all the firepower they needed to continue a civil suit against her
lying under oath.In politics, there are
no coincidences, and nothing happens that isn't planned. What looked like the absolute abolishment of
rule of law in America, where there's one law for the elites and another for us
peons, has instead given the American public a chance to prosecute Hillary.

There's a lot going on out
there including: racial and economic trouble, a bizarre Presidential race,
terror, moral decay, military tensions, and the list goes on. I’m looking for calmer heads, societal healing,
and a continued hope that I am wrong.

The Market:

Factually:

-I wondered when
the layoffs and firings would start.
This week: Schlumberger announced that it is laying off 8,000 more, John
Deere is cutting 11% of its workers in Moline, Illinois, and Conoco Phillips is
cutting 1,000 jobs.

-Real per capita
GDP has risen at an annual rate of 1.3% since the current expansion began in
2009 – less than half of the 2.7% average since 1790.

-The Gross
Federal Debt last quarter was 105.7% of GDP – compared to 73.5% in the final
quarter of the 2008 panic.

-This week the
IMF came out and lowered it's growth outlook for the global economy.

-The Residential
Construction Report from the U.S. Census Bureau and from HUD reported that both
permits and housing starts were down from a year ago. For permits, they
were down -10.1%, and the 2nd annual decline in as many months. In each case the year-over-year loss was in
the multi-family sector.

-Unfortunately economists believe that deficit spending is a trap that
provides a transitory
boost to economic activity that is more than reversed over time.

-The best
evidence suggests the U.S. Government deficit expenditures are costing the
taxpayers 1% on each dollar spent. That
means during times of deficit spending – it’s actually costing the taxpayer
MORE than it benefits him. According to
Hoisington and Hunt: “As debt levels rise, the debilitating impact on growth
speeds up exponentially.”

Lately, earnings continue
to be manufactured, but the top-line sales-revenue numbers (on year-over-year basis)
have been weak. It’s one thing to beat
expectations, but beating year-over-year actual numbers is quite another. As an example, the major banks beat
expectations, but their top-line numbers were not good on a year-over-year /
growth basis.The buy-backs (reducing
floats), cost cutting, and other profit margin expanders continue.

For the second week in a
row, the market simply went up.It
doesn't matter how bad the economic releases are, or how low the volume is – it
just keeps levitating.The choice is
easy, as the market makes these new all time highs, (a) Will the underlying
economy catch up, or (b) Will the market fall down to meet it?

The true economy does not
support a 19K DOW or a 2200 S&P, but we are very close to both of those
numbers.Due to our Central Banks
printing trillions of dollars, and injecting them into the market - the market
is no longer a reflection of the underlying economy.Consider what Bloomberg said this week about
Japan's stock market: “The Bank of Japan
is now a major owner of more Japanese
blue-chips than both BlackRock (the world's largest money manager), and the Vanguard
Group (which oversees more than $3 trillion).”The
Swiss (not to be outdone) have (according to Bloomberg): “Increased their holdings in
the U.S. equity market by 40% going
from $26.7B last quarter to $37.5B this quarter.”

So that’s why the market
is going up despite lousy economic reports, lousy corporate earnings, etc. The question is how far can it go? If our FED continues to print money out of
thin air and buy stocks with no regard to price, could we see DOW 40K?I tend to think that long before anything like
that happens, one of many different black swan events will put an end to all
this nonsense. Let's face it, every
major nation has big debt troubles, and war is on the doorstep all around the
globe. Something will break, and it
won't be pretty when it does.

Other than earnings, there
is not much on the horizon that should impact markets directly. The Fed is
sitting in the shadows with no rate hikes coming any time soon, certainly NOT
before the election.The Aussie Dollar
is selling off against the U.S. dollar, as investors expect the Reserve Bank of
Australia (RBA) will cut rates.If they
don’t cut rates we could see a rally in the Aussie dollar.The silliness is the belief that the U.S. Fed
will be raising rates any time soon.The
currency markets will continue to drive market volatility, and if the dollar
continues to rise – this will put increased pressure on U.S. corporations and
the economy.

Currently all I’m doing is
playing around the edges. In this game
of musical chairs, when the music stops, the dash for that open seat is going
to be spectacular. For this coming week,
I think the market will take a pause to do some backing and filling. We're already so overstretched that normal
comparisons are impossible to make.No
one has ever seen a market like this, because before 2008, central banks were
not allowed to be in the market like they are now. Ten years ago the idea of our FED buying tens
of billions worth of US stocks was a laughable concept.This market sideshow will be awfully interesting
to watch as the next several months unfold.

To follow me on Twitter.com and on StockTwits.com to get my daily thoughts
and trades – my handle is: taylorpamm.

Please be safe out there!

Disclaimer:

Expressed thoughts proffered within
the BARRONS REPORT, a Private and free weekly economic newsletter, are those of
noted entrepreneur, professor and author, R.F. Culbertson, contributing sources
and those he interviews. You
can learn more and get your free subscription by visiting: <http://rfcfinancialnews.blogspot.com>
.

Please write to Mr. Culbertson at:
<rfc@culbertsons.com>
to inform him of any reproductions, including when and where copy will be
reproduced. You may use in complete form or, if quoting in brief, reference
<rfcfinancialnews.blogspot.com>.

If you'd like to view RF's actual
stock trades - and see more of his thoughts - please feel free to sign up as a
Twitter follower - "taylorpamm"
is the handle.

If you'd like to see RF in action -
teaching people about investing - please feel free to view the TED talk that he
gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

Views expressed are provided for
information purposes only and should not be construed in any way as an offer,
an endorsement, or inducement to invest and is not in any way a testimony of,
or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are
not registered and licensed brokers. This
message may contain information that is confidential or privileged and is
intended only for the individual or entity named above and does not constitute
an offer for or advice about any alternative investment product. Such advice
can only be made when accompanied by a prospectus or similar offering
document. Past performance
is not indicative of future performance. Please make sure to review important
disclosures at the end of each article.

Note: Joining BARRONS REPORT is not
an offering for any investment. It represents only the opinions of RF
Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF
FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN
INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING
HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT
SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF
INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL
FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE
NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance
can be volatile. An investor could lose all or a substantial amount of his or
her investment. Often, alternative investment fund and account managers have
total trading authority over their funds or accounts; the use of a single
advisor applying generally similar trading programs could mean lack of
diversification and, consequently, higher risk. There is often no secondary
market for an investor's interest in alternative investments, and none is
expected to develop.

All material presented herein is
believed to be reliable but we cannot attest to its accuracy. Opinions
expressed in these reports may change without prior notice. Culbertson and/or
the staff may or may not have investments in any funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

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